Ian Pearson: My noble Friend the Parliamentary Under-Secretary of State for Competitiveness and Small Business made the following ministerial statement:
	On 18 September 2008, the then Secretary of State for Business, Enterprise and Regulatory Reform issued an intervention notice to the Office of Fair Trading (OFT) under section 42 of the Enterprise Act 2002 in relation to the proposed merger between Lloyds TSB Group and HBOS plc. This stated his belief that the stability of the UK financial system ought to be specified as a public interest consideration under section 58 of the Act and that it may be the case that the stability of the UK financial system is relevant to a consideration of the merger situation. That new public interest consideration relating to "the stability of the UK financial system" has now been finalised and has been added to the Act as section 58(2D).
	The intervention notice required the OFT to provide a report to the Secretary of State pursuant to section 44 of the Act. My noble Friend the Secretary of State received the OFT's report on this matter on 24 October 2008. This includes the OFT's advice that it is or may be the case that: arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, the creation of that merger situation may be expected to result in a substantial lessening of competition, and that it would not be appropriate to deal with the matter by way of statutory undertakings under paragraph 3 of schedule 7 to the Act. Under section 46(2) of the Act, my noble Friend is bound to accept the decisions of the OFT included in its report on these issues.
	The report also included the representations made to the OFT by the parties to the merger and other interested third parties as well as by the tripartite authorities (the Financial Services Authority, the Bank of England and HM Treasury) who made submissions concerning the public interest issues raised by the merger. My noble Friend also received a small number of written representations directly.
	Having received the OFT's report and the other representations, my noble Friend the Secretary of State was then required to make a decision under section 45 of the Act, on whether to refer the merger to the Competition Commission. In considering this matter, he was required to reach a decision on whether, taking account of both the competition and public interest issues, the merger may be expected to operate against the public interest. Under the terms of the Act, any anti-competitive outcome shall be treated as being adverse to the public interest unless it is justified by one or more man one public interest consideration which is relevant.
	My noble Friend the Secretary of State announced his decision on this matter on Friday 31 October and at the same time published a non-confidential version of the OFT's report and annexes. He has placed a copy of the full decision document in the Libraries of both Houses and the OFT report may be found on both the BERR and OFT websites. My noble Friend has decided not to refer the merger to the Competition Commission on the grounds that the possible anti-competitive effects identified in OFT's report are outweighed by the public interest in preserving the stability of the UK financial system.
	There is no question of ignoring the potential effects of the merger on competition the OFT has identified. My noble Friend takes these seriously. The merged bank will still be subject to the provisions of competition law with the competition authorities continuing to have the powers to investigate any breaches. The Office of Fair Trading will continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy.
	But the stability of the UK's financial markets is the Government's priority and it is right that this merger should have been considered on the basis of how that crucial public interest is best served. It is clear from the evidence that HBOS plays a major role in the UK financial sector and that its failure would have a number of very significant consequences that would severely damage the stability of the financial system and the wider economy. It is also clear that the merger provides an effective, market-based means of restoring the stability of HBOS and helps to secure the stability of the UK financial system as a whole. On balance, my noble Friend the Secretary of State believes these considerations justify the potential anti-competitive outcome the OFT has identified and that the public interest is best served by clearing the merger. It is now a matter for Lloyds TSB and HBOS to take the merger proposal to their shareholders.